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With multiple schemes launched, here’s what Modi govt can do next to help MSMEs reach full potential

Technology for MSMEs: While in this year’s budget proposal, the government has made a few positive steps in helping small businesses with extending capital gains and exemptions, there are more measures that the government can focus on providing to help SMBs reach their maximum potential.

Technology for MSMEs: In the world recovering from the aftermath of the global COVID pandemic, it has been well established that small and medium businesses (SMBs) biggest hope to survive in the recovering market is digitalisation. According to a KPMG-Google report, digital SMBs are expected to grow revenues and rake up profits twice as fast as their offline counterparts. Small businesses have learned the importance of creating a presence in today’s digital marketplace amidst the pandemic-induced lockdown. Regardless of the large volumes, the SMB sector in India has not seen momentous growth. There are several reasons thought to be behind the reluctance to grow online including lack of infrastructure, financial help, gender gap, and absence of digital skills – all of which make the journey to go digital, a challenge for Indian small businesses.

Businesses have been under tremendous pressure during the pandemic. SMBs have been grappling with financial issues starting with the inability to access credit and providing a concrete plan to the banks while applying for loans. They are struggling to maintain a perpetual cash flow to cover recurring costs and provide payments to vendors and employees. Regardless of several policies and initiatives in India, there are various limitations to SMB’s finance options, in relation to the growing debt demand in this sector. From the bank’s perspective, small companies can be extremely vulnerable to economic fluctuation making them the high-risk borrowers for them.

SMBs not only look at opportunities but also risks while transitioning their traditional business to online and creating a digital identity. Business owners are hesitant about losing a human connection and entering a new territory without a skill set, which has been further widened and exposed by the pandemic. The digital gap can also be attributed to the socioeconomic inequality that continues to exist in India. Small businesses from Tier-II and Tier-III cities are often not adequately educated and well versed with the technological skills around web development, online marketing, and network management skills, to feel comfortable creating a digital identity.

A study by Accenture validates that 43 per cent of all cyber-attacks worldwide are aimed at SMBs.  A lack of resources is leading to a weaker security strategy, making SMBs prey to cyberbullies. The rise of remote work has also increased the resilience of cloud computing, becoming a primary concern for increased phishing attacks. As a result, many small business owners and emerging entrepreneurs are concerned about creating an online presence for their business and the potential impacts of cyberbullies impacting their business.

According to a CISCO report, India currently ranks 9th in the small and medium business digital maturity in the Asia Pacific region. Being the backbone of the economy it has become crucial for SMB’s to receive digital support from the government, non-governmental originations, and private firms.

SMBs are gaining importance in India through government initiatives including Vocal for Local mission, Aatmanirbhar Bharat, Making India Self-Reliant, and the Digital India campaign. These campaigns are designed to help ensure government services are available online to all the citizens, by improving online infrastructure and increased internet connectivity. While in this year’s budget proposal, the government has made a few positive steps in helping the small businesses with extending capital gains and exemptions, there are more measures that the government can focus on providing to help SMBs reach their maximum potential.

Similar to India’s Atal Incubation Centre, a funding scheme that aims at supporting entrepreneurs by covering their operating costs of capital, more government incentives and benefits should be introduced for India’s SMB community. With the emergence of new businesses in varied sectors, eligibility criteria to attain capital should be re-visited. It is also important to create awareness about funding and incentives that already exist in our country. With lack of awareness, exposure to the programs and expert advice especially in the Tier-II and Tier-III cities becomes a factor that acts as a disadvantage.

The government’s focus on enhancing digital skills in the country has continually grown, thereby making digital skilling one of the biggest priorities across India, in the new normal environment. However, the government can introduce more schemes or special initiatives to help further boost digital transformation. They can consider focusing on next-gen technologies and upskilling programs, to nurture our young talent pool and thus accelerate our journey towards an ‘Atmanirbhar Bharat’. In fact, digital knowledge on new-age technologies should be introduced in the school curriculum as an official subject course, especially in rural and semi-urban schools.

The pandemic has accelerated the shift to the digital world and we need to maintain this growth momentum, especially in the smaller villages of the country. Increases in digital education and training initiatives to help ensure women who lost opportunities due to the aggravated digital divide can have a cascading effect on creating efficient businesses, new jobs, and economic development. The government can create free online and offline workshops for people who are looking to start their own businesses. Training programs including website building should be part of the curriculum coupled with explaining the right government program for their businesses, to help make them future-ready. To help Indian small businesses recover and be competitive in national and global markets, prioritization on digitalization, infrastructure enhancement, increased funding options, and comprehensive digital skilling should be the core focus for the government, starting now and for years to come.